Get a CLUE--and other
Lew Sichelman, United Feature Syndicate
Published October 1, 2006
Whether you are a buyer or a seller, or simply an owner who's staying put, there is information you might want to get your hands on.
For example, do you have a clue whether the place you are thinking about buying has suffered damage so severe that it was the subject of an insurance claim? Or are you sure someone hasn't walked into the recorder's office in the town where your vacation property is and said he was the rightful owner while you were away?
A wise buyer will want to know the loss history of the house. That's why ChoicePoint Asset Co. of Alpharetta, Ga., offers a home-sellers disclosure report called CLUE, for Comprehensive Loss Underwriting Exchange.
The report provides a five-year history of losses filed against an insurance policy on a property. Based on claims information submitted by insurers to the CLUE database, it includes dates, types of claims and the amounts paid for each.
If the report shows no losses, that the house hasn't been damaged severely enough by fire, flood, windstorm or other event for the owner to file a claim.
On the other hand, if a claim was filed, you'll be able to direct your home inspector to take an extra-hard look at the affected area to make sure it was repaired. Otherwise, you won't know whether the seller hired an unlicensed or unprofessional contractor to do the work. And your inspector might miss something you'll have to take care of.
Also, if the report shows that the homeowner, or even a previous one, filed a water-based insurance claim for mold, you might not be able to obtain a homeowners policy, or you might have to pay dearly for it. "Insurers are increasingly fearful of big losses, and they're scared to death of the mold issue," according to the National Association of Realtors. "If there's any evidence of water in the home, insuring it gets very dicey."
Sellers might also want to order a CLUE report so prospects will know the house has been damage free and that coverage won't be difficult to obtain. In fact, only the homeowner can obtain the report, so would-be buyers will need to ask the seller to buy one. The report costs $19.50 (www.choicetrust.com).
Many people passed on a home inspection in the frenzied market of the last few years, hoping their contingent-free offer would stand out among the competition. If you bought an existing house, getting an inspection now won't do you much good. But if you bought a new house, an inspection might be worthwhile, especially in light of the latest J.D. Power and Associates survey that found the typical buyer had 14 problems with his new home. That's up 7 percent from the 1994 study.
Typically, builders' warranties last at least a year--and sometimes longer--against major defects. They also guarantee their workmanship and materials for the first year. If your builder's warranty hasn't expired, an examination by a third party could highlight problems that might become major defects later.
"We are doing a lot of inspections now for buyers on homes that were bought without an inspection, and we are finding a lot of stuff the seller didn't know about," says Greg Haskett of the Home Team Inspection Service in Milford, Ohio.
So is Will Decker of Decker Home Services and president of the Chicagoland Chapter of the National Association of Certified Home Inspectors. "I have personally seen new homes in the 4,500- to 6,500-square-foot range that are just a mess," he says. "Leaking concrete foundations, rotted roof decking, multiple electrical defects and significant safety issues seem to be more the norm than the exception."
Environmental hazards, such as lead-based paint, asbestos and high levels of carbon monoxide, radon and toxic mold are among the most common defects found by Home Team's more than 250 franchisees. And when they find such a problem, they often recommend their clients hire an expert to look into it. To protect your health and keep from being forced to spend thousands to clean up the hazards after you move in, John Brennan of Brennan Environmental in Summit, N.J., says would-be buyers of houses heated by oil should look for underground storage tanks. Also, floors, walls, ceiling tiles and pipes should be tested for asbestos, which becomes a problem if the asbestos-containing materials crumble, flake or deteriorate. And, of course, the place should be tested for mold.
According to Brennan, it can cost $2,000 or so to remove a buried oil tank. But if the tank has leaked, the fee can run $6,000 to $8,000 because the soil has to be removed and the hole filled with "clean" dirt. If the leak is "very widespread, the costs can really escalate," says Brennan. "But even if the tank is inactive, it should be removed. Because if it's not leaking now, it will some day."
If the house is on septic, you'll want to inspect that system, too. An examination will determine whether the system is working properly, as well as its age and life expectancy. Typically, a septic system will last 20 to 30 years, Brennan says. But a new system costs about $30,000.
Lenders order title searches to make sure the seller is who he says he is and that he has clear ownership of the property. But homeowners can order title searches, too, and they should for several reasons, says David Pelligrinelli of AFX Title Search in Dawsonville, Ga.
"Obviously, I'm biased but if I was a layperson, I would do a search every couple of years," says Pelligrinelli, who operates titlesearch.com, a Web site where people can order online searches. "If I were an absentee owner, I'd do it more often than that. And I'd do it six months after I refinanced my house."
One of the most common problems the Georgia title expert finds is "the original mortgage never gets released" when the owner refinances. And if the old lender has been bought out or merged and is no longer in business, the problem becomes more complicated because only the original company can release a lien.
If this happens and you are trying to sell your house, Pelligrinelli says it could be months before the issue is resolved and the buyer can get clear title. But by that time, the buyer might get tired of waiting and go elsewhere.
The title expert also is seeing more instances in which liens against properties have been misfiled. "The records have been getting more sloppy, especially over the last two years," he says. "The percentage of mistakes has gone way up."
And Pelligrinelli has seen cases of "outright deed fraud" in which someone transfers an unoccupied but furnished vacation property into his name and then sells it to an unsuspecting buyer. As long as the documents look legitimate, the title clerk at the county court house will accept them. They don't do any verification.
Even buyers might want to run a quick title search on a property. After all, the presence of liens, foreclosures or divorce actions can suggest a distressed seller who wants to get out in the worst way.
You may write to Lew Sichelman c/o Chicago Tribune, Real Estate, 435 N. Michigan Ave., 4th floor, Chicago, IL 60611. Or e-mail him at firstname.lastname@example.org. Sorry, he cannot make personal replies. Answers will be supplied only through the newspaper.
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